High-speed trading firm is going to war with the SEC

2rosy said:
how does d-limit work? If I place a buy limit at 50.62 and market is 50.64/50.65 ticking down, does it then change my order to 50.61? Where am I placed in the queue?
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My understanding is that IEX has come up with an algorithm which predicts when the NBBO is about to change or "decay". (The inputs and formula are provided in documents on their website) Under these circumstances a normal limit order would become stale and get picked off by HFT for a small profit, while the D-limit is automatically adjusted by the exchange to the new NBBO price.

Not something that's worth it for me to mess with, but if Citadel is desperate to shut it down then IEX must be on the right track.

Odds that Biden's SEC turns the spotlight on exchange data fees next? CME enjoys something like 60% profit margins.
 
SunTrader said:
Because nothing is ever free. Not even the air we breathe. Everything has a cost.

Oh and commission free brokers sell their order flow silly.
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Many companies outsource part of their product. Apple does it quite extensively. . There is nothing inherently wrong with selling order flow if everybody turns out to be in a win win situation. It is lot less expensive than creating their own market making department

Here is a copy of my previous post in this thread:"f not for Citadel. etc. l the spreads would be .05+. Most of my quotes are with a penny spread. Most of the time my fills are in between that penny spread. If Citadel makes a large amount of money while making the market more efficient more power to them. My brokerage firm also has to make money.It is a win win situation,all around. I can remember the old days when the spreads were 1/8 or .125 . You hardly ever got fills in between."
 
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Specterx said:
My understanding is that IEX has come up with an algorithm which predicts when the NBBO is about to change or "decay". (The inputs and formula are provided in documents on their website) Under these circumstances a normal limit order would become stale and get picked off by HFT for a small profit, while the D-limit is automatically adjusted by the exchange to the new NBBO price.

Not something that's worth it for me to mess with, but if Citadel is desperate to shut it down then IEX must be on the right track.

Odds that Biden's SEC turns the spotlight on exchange data fees next? CME enjoys something like 60% profit margins.
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after reading this, it seems like the d-limit order is not really cxl/replaced it is just given a better fill price. Doesn't seem fair

https://iextrading.com/trading/orde...like a regular limit,1 MPV outside that level.
 
2rosy said:
after reading this, it seems like the d-limit order is not really cxl/replaced it is just given a better fill price. Doesn't seem fair

https://iextrading.com/trading/order-types/#:~:text=Discretionary Limit (D-Limit) behaves like a regular limit,1 MPV outside that level.
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That's a pretty concise example. I can see it both ways, however it's evident that the goal here is to encourage liquidity to be displayed which might not be otherwise, due to (among other reasons) the prospect of stale quotes being picked off by HFT.

In the example scenario the D-limit trader is rewarded for displaying liquidity, the taker's sell order still gets filled at his/her limit price, and you've eliminated one of Citadel's predatory latency-arb edges.
 
Specterx said:
That's a pretty concise example. I can see it both ways, however it's evident that the goal here is to encourage liquidity to be displayed which might not be otherwise, due to (among other reasons) the prospect of stale quotes being picked off by HFT.

In the example scenario the D-limit trader is rewarded for displaying liquidity, the taker's sell order still gets filled at his/her limit price, and you've eliminated one of Citadel's predatory latency-arb edges.
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so d-limit order allows the retail investor to post phantom liquidity. Once it is about to get hit it is pulled. Isn't that what many on ET cry about?
 
zdreg said:
Many companies outsource part of their product. Apple does it quite extensively. . There is nothing inherently wrong with selling order flow if everybody turns out to be in a win win situation. It is lot less expensive than creating their own market making department

Here is a copy of my previous post in this thread:"f not for Citadel. etc. l the spreads would be .05+. Most of my quotes are with a penny spread. Most of the time my fills are in between that penny spread. If Citadel makes a large amount of money while making the market more efficient more power to them. My brokerage firm also has to make money.It is a win win situation,all around. I can remember the old days when the spreads were 1/8 or .125 . You hardly ever got fills in between."
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:) outsourcing. They are selllllling their order flow. Which Citadel gladly pays for.

And the spread is narrow under a pay for order flow model. But there are other markets/venues/exchanges that are narrow as well without a pay for order flow model.

As for the old (old) days commissions were $250 a trade thanks to the gubmint not allowing discounting till Charles Schwab and Muriel Seibert showed up on the scene. Once volume increased due to lower rates and electronic efficiencies and penny increments were implemented commission rates became almost nothing $1, $2, $3 per trade. But that was wasn't good enough for some. So they came up with $0 ... that isn't really $0. "Don't look behind the curtain".

Where we are at today. Well not for me since I don't trade equities - and just one of many reasons why I don't. I prefer what you see is what you get.
 
zdreg said:
If not for Citadel. etc. l the spreads would be .05+. Most of my quotes are with a penny spread. Most of the time my fills are in between that penny spread. If Citadel makes a large amount of money while making the market more efficient more power to them. My brokerage firm also has to make money.It is a win win situation,all around. I can remember the old days when the spreads were 1/8 or .125 . You hardly ever got fills in between.
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You comparing fills Pre decimalization and the fills now. Not exactly ceteris paribus there
 
Last week on Tasty Trade, Tom Sosnoff made this exact argument that Payment for Order Flow is a good thing because spreads are tight with high liquidity.

If HFT like Citadel can not improve your price than they will pass order directly to exchange.... Worse case scenario your order is directly routed to an exchange and the HFT will not make money.

Was wondering what other trader's thoughts are?

Here is Tasty trade video from a few weeks ago,

zdreg said:
If not for Citadel. etc. l the spreads would be .05+. Most of my quotes are with a penny spread. Most of the time my fills are in between that penny spread. If Citadel makes a large amount of money while making the market more efficient more power to them. My brokerage firm also has to make money.It is a win win situation,all around. I can remember the old days when the spreads were 1/8 or .125 . You hardly ever got fills in between.
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